Welcome to our Environmental Certificates Market Update. We will update you on what has happened recently in the markets for Large-scale Generation Certificates (LGCs) and Australian Carbon Credit Units (ACCUs).
While slightly down on the very high price levels sustained in 2023, the prices of LGCs remained fairly elevated until they started to trend down from September 2024, followed by a dramatic drop in November 2024.
Unlike the previous couple of years, all vintages of the LGCs moved in a similar direction – down. To understand some of the fundamentals of the price drop, let’s have a closer look at the supply and demand balance for the 2024 Large-scale Renewable Energy Certificate (LREC) target.
We can see the certificates were supplied from:
As in 2023, 2024 certificate creation broke records with significant year-on-year growth in all quarters. This was despite a significant wind-drought experienced across the NEM in Q2 and Q3 ‘24, which had a significant impact on wind generation.
However, the high year-on-year growth in renewables’ capacity in the NEM was enough to offset this hit to wind-based LGC creation. Further, some of the significant project delays and transmission line constraints that occurred in previous years had seemingly eased – albeit slightly.
As demand from entities liable to surrender under the scheme remained the most significant, redemptions (certificates surrendered to make up for past short falls) and voluntary surrenders from non-liable entities were, once again, notable drivers of demand.
Indeed, voluntary surrenders once again broke the record set the year before. However, the combination of record high creation and the high balance carried over from previous years was simply too high, and easily outpaced demand in 2024.
As mentioned, prices steadily trended downwards from September before dropping sharply in November and then partially recovering later in the month.
At the time, the prevailing market sentiment was that LGC prices would continue to decline due to the growing surplus of certificates from new renewable projects and the proposed Renewable Energy Guarantee of Origin (REGO) scheme. The REGO scheme is slated to start by the end of 2026 and will formally replace the Renewable Energy Target (RET) scheme from 2030.
That being said, much of the trading volume seen at the end of 2024 didn’t come from natural sellers, such as those with large renewable projects in their portfolios. Instead, it came from a few motivated trading participants who were well-positioned for a price drop and volatility.
These traders tested the market and encountered little resistance from natural participants, like retailers or natural sellers. This lack of resistance allowed the market to drop sharply until a buying support level was found.
Given the steep drop in prices over a short period, it’s possible that other participants needed to close out unfavorable positions to prevent further losses.
As we moved into the new year, prices temporarily flattened before continuing their downward trend, driven by the weight of supply pushing prices down.
As market participants were expecting, Q1 2025 saw record voluntary demand. 2025 also marks the first year in which RE100 companies (those who have committed to 100% renewable energy from as early as 2025) begin to surrender their commitments.
The effective halving of the LGC price, combined with the easing of forward prices since the highs of 2022, has potentially attracted increased voluntary surrendering from companies.
However, Q1 ‘25 has also seen record LGC creation, with over 14.2 million certificates created versus the 13.8 million in Q1 ‘24.
It will be interesting to see how the supply and demand dynamics in the LGC market shape up over the next year.
This update on the Australian carbon market will focus on the demand, supply and prices of the Australian Carbon Credit Units (ACCUs) and Safeguard Mechanism Credits (SMCs) over the last 12 months.
The Safeguard Mechanism underpins the compliance demand for ACCUs and SMCs. Facilities exceeding their baselines are required to surrender ACCUs or SMCs to offset their excess emissions.
During the 2024 financial year, the Safeguard Mechanism scheme had its first year of operation since the reforms to the scheme came into effect.
Facilities regulated under the Safeguard Mechanism surrendered approximately 7.1 million ACCUs for the 2024 financial year1. Additionally, approximately 1.4 million SMCs2 were surrendered during that period, bringing the total surrendered credit units to 8.5 million for safeguard compliance purposes3.
The coal sector accounted for 47% of the total credits surrendered, whilst the manufacturing sector made up 14%, and the metal mining and oil and gas sectors, each constituted 17% of the total credits surrendered.
In addition to the safeguard compliance demand, non-safeguard surrenders accounted for approximately 1.3 million ACCUs in 20244.
On the supply side, the Clean Energy Regulator (CER) issued a record 18.8 million ACCUs in 2024, a 9% increase from the 17.2 million issued in 20235.
In the first quarter of 2025, the CER issued 3.0 million ACCUs6, indicating a robust start toward the CER’s anticipated annual issuance of between 19 and 24 million ACCUs for 20257.
These figures reflect the growth and activity within Australia’s carbon market, which seem to have been driven by policy reforms and increased participation in emissions reduction initiatives.
By the end of Q1 2025, the total number of ACCUs held in the Australian National Registry of Emissions Units (ANREU) was 46 million8, an increase in the year-on-year ACCU accumulation of 19%9 from the total holding of approximately 39 million at the end of Q1 202410.
Of the 46 million ACCUs held in the ANREU, approximately 61% are held by safeguard and safeguard-related entities11
A significant development in the 2024 financial year was the introduction of Safeguard Mechanism Credits. Safeguard Mechanism Credits can be used interchangeably with ACCUs for compliance purposes under the Safeguard Mechanism scheme, providing facilities with additional flexibility in meeting their obligations.
In the 2024 financial year, 62 facilities received a total of 8.3 million SMCs12, of which 1.4 million13 were surrendered for compliance purposes. The remaining 6.9 million SMCs14 are likely held in the new Unit and Certificate Registry.
ACCU prices have experienced notable fluctuation over the past 12 months.
The generic ACCU weighted-average spot prices hovered between $32 and $38.50 per ACCU throughout May to October 2024 before reaching a peak of $42.55 in mid-November 2024. This represented a 15% increase over 10 days, driven by anticipated supply shortages and heightened demand ahead of the compliance deadline for surrendering under the Safeguard Mechanism.
The prices have since adjusted to approximately $35.25 in mid-May 2025, reflecting market stabilisation post the initial policy implementation. We believe these price movements were influenced by regulatory developments, market demand and the integrity of ACCU supply.
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1 2023-24-safeguard-data-insights-0 (page 4)
2 2023-24-safeguard-data-insights-0 (page 4)
3 These figures reflect the first full compliance year following reforms to the Safeguard Mechanism, which introduced declining baselines of 4.9% pa to drive emissions reduction.
4 Safeguard and Australian carbon credit unit (ACCU) schemes | Clean Energy Regulator
5 Safeguard and Australian carbon credit unit (ACCU) schemes | Clean Energy Regulator – Q4 2024 ACCU Market Dynamics see the diagram. Australian carbon credit units (ACCUs) | Clean Energy Regulator
6 cer.gov.au.xlsx (figure 1.4 of the Q1 2025 Quarterly Carbon Market Report) [Figure 1.6 – Q1 2025 Total, Row 28]
7 Safeguard and Australian carbon credit unit (ACCU) schemes | Clean Energy Regulator
8 cer.gov.au.xlsx (figure 1.4 of the Q1 2025 Quarterly Carbon Market Report)
9 cer.gov.au.xlsx (figure 1.4 of the Q1 2025 Quarterly Carbon Market Report) [Calculation – (46-38.5)/38.6 = 19%]
10 cer.gov.au.xlsx (figure 1.4 of the Q1 2025 Quarterly Carbon Market Report)
11 cer.gov.au.xlsx (figure 1.4 of the Q1 2025 Quarterly Carbon Market Report) [Calculation = (26+1.9)/46]
12 Explore the 2023–24 Safeguard Mechanism data | Clean Energy Regulator
13 Explore the 2023–24 Safeguard Mechanism data | Clean Energy Regulator
14 Explore the 2023–24 Safeguard Mechanism data | Clean Energy Regulator [Calculation = 8.3-1.4 million]
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10 June 2025
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10 July 2023
Learn more about Environmental Certificates covered in our wholesale energy market updates in our short energy education video.
Learn more about Large-scale Generation Certificates covered in our wholesale energy market updates in our short energy education video.
